Stakeholders Weigh MMA2 Concession Agreement, 10 Years After leadership.ng Jun 4, 2017 5:48 AM

Stakeholders Weigh MMA2 Concession Agreement, 10 Years After

leadership.ng

Jun 4, 2017 5:48 AM

Bi-Courtney Aviation Services Limited (BASL) operators of the Murtala Muhammed Domestic Airport Terminal two popularly referred to as MMA2 recently celebrated10 years of operating the airport terminal. In this piece, ANTHONY AWUNOR looks at the merits and demerits of the agreements signed by Federal Airports Authority of Nigeria (FAAN) and BASL.

The tenth year anniversary elaborately celebrated by Bi- Courtney Aviation Services Limited (BASL) operators of the Murtala Muhammed Domestic Airport Terminal two popularly referred to as MMA2 was very successful. The celebration has however, opened up a new chapter for discourse in the nation’s aviation sector, ministries and government agencies.
Looking at the concession agreement between Federal Airports Authority of Nigeria (FAAN) and BASL, one could see it from different perspectives. While some see it as a good development, others see it as a bad one while a lot more may perceive the agreement as very challenging and controversial one.
Obviously, it is very clear that all the parties involved seem to be comfortable that the concession agreement is on the Build Operate and Transfer (BOT) model. However, the issue of the life span of the contract and scope of activities of the concessionaire remain issues of great controversies which have led to many litigations and counter litigations between FAAN and BASL.
The claim by experts that concession, BOT model has its strength over other type of PPP in that it is an effective way to attract finance required to fund new constructions or rehabilitate existing facilities came to bear following the reconstruction of the burnt domestic terminal of Murtala Muhammed Airport, Lagos.
With paucity of fund at the disposal of the federal government at that time and even now, attempt to embark on such project would have been forlorn. The decision of the Federal government to embrace the option of encouraging private sector through PPP into the reconstruction of the burnt terminal made it available for use within few years after the inferno was a wise on.
Commending the concession agreement, former President of Aviation Round Table (ART) Capt Dele Ore pointed out that the project is a welcome one which has become a benchmark for anyone who might want to work in that direction. Ore said “When that terminal a few years ago got burnt the Federal Government refused to reconstruct that place and of course there were attempts at reconstructing it without success until Bi-Courtney came and rescued the nation by putting up the magnificent edifice.
“We saw brilliance and capacity in the magnificent edifice. But suddenly trouble came over the length of the life of the contract. This disturbed me a lot. We have seen what we can call a benchmark and whoever wants to do anything in that direction must do something better. The issue all over the world today is that government has no business in doing business. Concession is the best way to go if we want to stop or bridge existing infrastructure gap.”
In his own views, chief executive officer of Centurion Security, Group Capt John Ojikutu (Rtd) noted that another key advantage of the concession arrangement is that it provides incentives to the operator to improve efficiency and effectiveness since gains in efficiency translate into increased profits and return to the concessionaire and government.
According to Ojikutu, through a well implemented concession agreement, revenue would be boosted and while development be spurred. Ojikutu however regretted that such has not been the case in Nigeria because of government policy and the bureaucracy as well as greed of those within and outside the system who do not believe in transparency.
“Everyone be it those in government or outside, the concessionaires, have seen the money, I mean real money, in the aviation sector. That is why no one wants to let go. It is unfortunate that because of inconsistency in government policies and the insincerity of those behind the implementation of those policies, Government and the concessionaires are not making enough money from system. The money is finding its way into the pockets of some individual. This is not the best for the survival of the sector,” Ojikutu stated.
Speaking further, the aviation expert said “but if concession agreements are well drafted and implemented without ambiguities, the government and the concessionaires would make their returns within the specified period of time. But because the whole thing is planted on deceit, there is confusion everywhere. Hence both FAAN and BASL are engaged in avoidable revenue losses on the concession.”
Equally the transfer of the full package of operating and financing responsibilities enables the concessionaire to prioritise and innovate as it deems most effective. Going with Capt Dele Ore position, the public enterprises is less concerned about returns on investment which is a priority to private sector operators. He noted that since BASL wants quick, commensurate and appreciable returns on its investment in the concession, it cannot afford to do anything below what would spur effectiveness in the system.
Despite all the strength noted in the concession agreement between FAAN and BASL on the operation of MMA2, the concession is seen more as a curse rather than a blessing to the two actors when viewed from the numbers of litigations the two have been embroiled in the last ten years the concession subsists.
While concession has been seen by experts as a great impetus to economic and social development in an emerging economy, embarking on it has been described as walking a minefield of unfamiliar forest. It has a lot of risk factors.
While it remains a big risk to the concessionaire, it could equally be of great risk to the government in that the complexity of the contract required to define the operator’s activities has brought a lot of drawbacks to many agreements in the industry. The well defined operation activities of BASL in the concession agreement is a major controversy that is about to rear its head as Lagos State proposes to build an airport in Epe axis of the state.
Whereas BASL claimed it has entered into an agreement that forbids construction, establishment and operation of any domestic airport terminal in Lagos State. This has for long remained an issue of litigation between the two parties and it is likely Lagos state would soon be a party to it. How this riddle would be resolved left many wondering on what would become of aviation development in the state and Nigeria as a whole. Revenue loss through poor or improper implementation of concession agreement has been a major setback to the option.
Recently, chairman of Bi-Courtney Resort group Dr. Wale Babalakin at a press briefing to mark the 10th year operations of the terminal, claimed FAAN owes BASL a sum of N200billion being the damages awarded against FAAN by a Federal High Court and subsequent revenue accruable to it from the operations of the domestic flights from GAT. This some stakeholders argued would never arose if the concession agreement has been implanted without rancour.
The experts who don’t want their names in print observed that the ‘addendum’ introduced to the agreement have caused a lot of mistrust between the parties. They argued that the claimed change in the clauses of the concession agreement which FAAN denies knowledge of “is a product of lack of transparency on the parts of both parties.” They are of the opinions that “if other concessions have to work without glitz in the sector, transparency must be the watch word.”
Speaking on why patriotism should be placed about personal or pecuniary benefits while entering into concession agreements at a time the government wants to concession some of its airports across the country, Ojikutu noted that the volume of money seeing by both government officials and investor s in the system remains the major attractions and not to provide services.
The ART General Secretary noted that if those pushing and obstructing don’t see money in the system they would spare themselves of the troubles. “If Babalakin is not making money from the concession, he would have let go of it long ago. Similarly, if those in FAAN and Ministry have realised that there is no money in the sector they would not want to die in the struggle. Unfortunate they are all making money at the expense of the Federal government while the Federal government keeps borrowing to finance projects in the sector,” he lamented.
He therefore advised government to take caution in the subsequent concessions agreements, even as he advised that federal government should in its new decision on concession drive concession only non aeronautical side of the airport and leave the aeronautical side where it many run against International Civil Aviation Organisation (ICAO) regulations.
Meanwhile, PPP was established in United Kingdom in 1992, through Private Financing Initiative, (PFI) the programme aimed at encouraging public private partnership in the country. Toeing the same line, the Federal government of Nigeria during the administrations of Generals Ibrahim Babangida and Abdusalami Abubarkar engaged private sector to participate in government business by introducing the Public Enterprises Decree which later became (Privatisation and Commercialisation) Acts 1999.
While it became obvious that the need for PPP in the country has become the real way to pursue if the nation has to bridge the infrastructure gap and advance economic and social development, the Federal government conceptualised an agency that would engender a comprehensive competitive and attractive PPP industry in Nigeria with the view to attracting significant porivate sector resources for infrastructural private sector resources for infrastructural development.
This however led to the establishment of Infrastructure Concession Regulatory Commission (ICRC) by Chief Olusegun Obasanjo’s administration through Infrastructure Concession Regulation Commission (ICRC) Act of 2005 and later the Public Procurement Act of 2007.
The ICRC with key strategic objective to accelerate investments in national infrastructure through private sector funding, by assisting the federal government and its Ministries, Departments and agencies (MDA) to implement and establish effective PPP process. The scope of the federal government’s programme for PPP is the creation of new infrastructure and key expansion and refurbishment of existing assets at the federal level.
The ICRC is the designated national authority for the regulation of PPP in Nigeria. It is to foster inter-agency collaboration in the delivery of PPP. Experts who argued in support of PPP option over traditional public procurement claimed that its introduction is the most effective and efficient ways of improving public infrastructure and stimulating economic development in an increasingly interdependent global economy.
They claimed that Government revenues are finite and PPPs compliments Government’s investment in infrastructure. In Nigeria, PPP was initially conceived to attract Foreign Direct Investments (FDIs). Nigerian PPP network is designed to bring all states of the federation together and address the PPP in their domains for the good of the nation.

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